Monthly Archive for June, 2013

A Queer Bit of Reasoning

Published
by
Steve Landsburg
on June 26, 2013
in Bad Reasoning and Current Events
. 110 Comments

Here is Justice Anthony Scalia, dissenting from the Supreme Court ruling striking down the Defense of Marriage Act:

It is enough to say that the Constitution neither requires nor forbids our society to approve of same-sex marriage, much as it neither requires nor forbids us to approve of no-fault divorce, polygamy, or the consumption of alcohol.

I don’t get it. The Consitution neither requires nor forbids our society to approve of the Atlantic Monthly, but it still requires us to tolerate the Atlantic Monthly. Or does Justice Scalia disagree?

(Note to potential commenters: This is not a post about whether we as a society either should or should not approve of same-sex marriage, or for that matter whether there’s any meaningful sense in which a “society” is capable of approving anything at all. It’s also not a post about what our policy should be toward same-sex marriage. It’s a post about Justice Scalia’s odd notion of what this case was about. Please stay on topic.)

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Multiple Comments

Published
by
Steve Landsburg
on June 26, 2013
in Bad Reasoning, Economics and Paul Krugman
. 80 Comments

Following up on yesterday’s Keynesian Cross post:

  1. The point, for those who missed it, is that using exactly the same reasoning that we find in Eco 101 textbooks to derive the Keynesian multiplier, we can conclude that sending all your money to me will make everyone rich. The conclusion is absurd; therefore the reasoning is invalid. And reasoning that’s invalid in one context is also invalid in another.
  2. Some commenters thought that my version of the Keynesian cross argument was an unfair caricature. I invite those commenters to peruse some actual Eco 101 textbooks. For example, they might browse through the section labeled “The Income-Expenditure Model” in a widely used textbook called Macroeconomics. The authors are Robin Wells and Paul Krugman.
  3. Let’s review the logic of that model. (See yesterday’s post for explanations of the notation.)

    Step I: Start with an accounting identity (in this case C+I+G).
    Step II: Throw in an empirical regularity (in this case C=.8Y).
    Step III: Combine the two equations to get a third equation (Y=5(I+G).)
    Step IV: Do a thought experiment involving a policy change (e.g. an increase in G) and predict the outcome by assuming that your equations will continue to hold after the policy change.

    By contrast, my alternative model starts with an accounting identity (Y=L+E), throws in an empirical regularity (Y=.999999E), combines these equations to get a third (Y=1000000L) and then predicts the outcome of a thought experiment (send me your money!) by assuming that the equations will continue to hold. In other words, yes, exactly the same logic.

  4. The problem with the Landsburg multiplier story is that after you send me your money, the equation Y=.999999E is not likely to remain true. The problem with the Keynesian multiplier story is that after you increase government spending, the equality C=.8Y is not likely to remain true. Why not? Well, for one thing, if the government buys you a bowl of Wheaties, you’re correspondingly less likely to go out and buy a bowl of Wheaties for yourself. For another, if the government spends wastefully, you, as a taxpayer, are going to end up poorer, which means you’ll probably consume less. The exact nature of the change depends on the exact nature of the government spending. But there’s surely no reason to buy into the model’s assumption that there will be no change at all.

    5. Continue reading ‘Multiple Comments’

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The Landsburg Multiplier: How to Make Everyone Rich

Published
by
Steve Landsburg
on June 25, 2013
in Economics
. 59 Comments

Today’s lesson is about the Keynesian multiplier.

If you studied economics from one of the classic textbooks (like Samuelson) you might remember how this goes. We start with an accounting identity, which nobody can deny:

Y = C + I + G

Here Y represents the value of everything produced in (say) a given month, which in turn is equal to the total income generated in that month (because producing a $20 radio allows you — or perhaps you and your boss jointly — to earn $20 worth of income). C (which stands for consumption) is the value of the output that ends up in households; I (which stands for investment) is the value of the output that ends up at firms, and G (which stands for government spending) is the value of the output that ends up in the hands of the government. Since all output ends up somewhere, and since households, firms and government exhaust the possibilities, this equation must be true.

Next, we notice that people tend to spend, oh, say about 80 percent of their incomes. What they spend is equal to the value of what ends up in their households, which we’ve already called C. So we have

C = .8Y

Now we use a little algebra to combine our two equations and quickly derive a new equation:

Y = 5(I+G)

That 5 is the famous Keynesian multiplier. In this case, it tells you that if you increase government spending by one dollar, then economy-wide output (and hence economy-wide income) will increase by a whopping five dollars. What a deal!

Now, though I cannot seem to find a reference, I have a vague memory that it was Murray Rothbard who observed that the really neat thing about this argument is that you can do exactly the same thing with any accounting identity. Let’s start with this one:

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Judgment Calls

Published
by
Steve Landsburg
on June 23, 2013
in Current Events, Law and Policy
. 69 Comments

If you need further proof that a human being is a close cousin to a chimpanzee, you need look no farther than the design of the American justice system.

Debra Nelson, the judge in the George Zimmerman murder case, has disallowed testimony from audio experts about whether that’s Zimmerman or the deceased Trayvon Martin who can be heard screaming on the 911 tape. That matters, because much of what’s in dispute here is the question of who attacked whom.

One prosecution expert was prepared to testify that the screams are Martin’s, and another that they are at least not Zimmerman’s. Defense experts were prepared to dispute those claims. They made their arguments in front of the judge for several days, whereupon she ruled that the jury won’t be allowed to hear any of it.

The judge’s concern was that there is no good evidence that the experts’ techniques are reliable. That might be true. But who should be making that call — the judge or the jury?

There is, I think, an excellent case to be made that juries are, by and large, incompetent (or at least less competent than judges) to determine what constitutes a plausible argument by an audio expert. But if you buy that argument, I think you’ll be pretty much forced to conclude that the jury is also incompetent to reach a verdict. If that’s your view, we shouldn’t have juries in the first place.

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Hate Crimes in Black and White

Published
by
Steve Landsburg
on June 17, 2013
in Bad Reasoning and Policy
. 109 Comments

Which should the law treat more severely: Killing a guy because he cut you off in traffic or killing a guy because you don’t like his race?

Elsewhere on the web (link omitted because the source is the invitation-only blog of a personal friend), I read the following:

In the former case, you’re a danger to the person who wronged you. In the latter, you’re a danger to tens of millions of people, and that’s just in the US.

Hate crimes are different because the perp’s target list is vastly larger, with the built-in implication of recidivism.

There’s so much wrong with this I’m not sure where to begin. First of all, when a guy kills another guy for cutting him off in traffic, I’m inclined to think the likelihood of recidivism is pretty high. It’s not like nobody’s ever going to piss him off again. Second of all, I’d think that severity of punishment should be tied primarily to its effectiveness as a deterrent to others, not as a deterrent to recidivism. We can deal with recidivism partly by keeping an eye on past offenders, but when it comes to deterring unknown others, punishment is all we’ve got.

But I mention those issues only in passing on my way to what I think is the really interesting question, namely: Which is more harmful? Targeting a specific individual for death or targeting a randomly chosen representative of some race?

And while we’re at it: Which is more harmful? Targeting someone for being black, or for being white?

Some thoughts:

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Basic Confusion

Published
by
Steve Landsburg
on June 14, 2013
in Oddities and Personal
. 13 Comments

Andre Weil was a towering figure in 20th century mathematics, his book on Basic Number Theory being just one of his many immortal contributions. (The title is something of a joke; this is a pathbreaking treatise at a very advanced level.)

None of which explains why today, fifteen years after Weil’s death, I received an email from the mathematical publisher Springer-Verlag that reads:

Dear Andre Weil,

We are writing today regarding your book *Basic Number Theory (ISBN: 978-3-662-05980-7), and to let you know about our plans
for an electronic archive, the Springer Book Archives.

…

Your author benefits at a glance:

– Your book will be digitized and become an eBook, published on SpringerLink, our online platform, and for e-reading devices such as the Kindle or iPad.

– Your book can never go ‘out-of-print’ and will be preserved for future generations of scientists.

– You will be provided with free access to the electronic version of your book once it is included in the archive.

– You will receive royalties, or can choose to waive them in support of charitable organizations such as INASP or Research4Life,
that help provide the developing world with access to scientific research.

Please go to the following website and select your preferred royalty option.

[URL deleted]

Yours sincerely,

[Etc.]

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Cato Unbound: The Political Economy of Recycling

Published
by
Steve Landsburg
on June 12, 2013
in Economics, Policy and Self-Promotion
. 75 Comments

Here’s why recycling poses a policy dilemma: To keep people from dumping their trash on their neighbor’s lawns (or, when they burn it, in their neighbor’s lungs), we have to keep the price of landfill space artificially low. But once you’ve made landfill space cheap, you weaken the incentive to recycle, so arguably we get too little recycling. One solution is to pump up that incentive by casting recycling as a moral imperative. Unfortunately, once people believe recycling is a moral obligation, we’re liable to get too much of it.

This month’s issue of Cato Unbound is titled “The Political Economy of Recycling”, with a lead essay by Michael Munger of Duke University expanding on these and related points, with responses by Edward Humes, Melissa Walsh Innes and myself.

Over the course of the next month or so, we’ll be posting responses and re-responses to each others’ essays, as the mood strikes us. The best of your comments here might well find their way into some of my posted responses there.

Below the fold, a brief teaser from my essay:

Continue reading ‘Cato Unbound: The Political Economy of Recycling’

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The Story Darkens

Published
by
Steve Landsburg
on June 10, 2013
in Current Events, Outrage, Paul Krugman, Politics and Truthseeking
. 65 Comments

It turns out that last week’s tag-team smear of a young Heritage Foundation economist, executed by Senator Sheldon Whitehouse of Rhode Island and his lackey Paul Krugman of the New York Times, was even worse than we knew.

As you’ll recall, Salim Furth of the Heritage Foundation testified before the Senate Budget Committee, accurately presenting data on economic policy changes in various countries for the years 2007-2012. Then Senator Whitehouse, cheered on by Paul Krugman, spent eight minutes excoriating Furth for inventing those numbers — the sort of accusation which, if it were taken seriously, would surely destroy Furth’s career. (As well it ought to, if it had contained a grain of truth.)

And what was Senator Whitehouse’s evidence for Furth’s “meretriciousness”, as he put it? Well, it was the fact that Whitehouse had gone to Furth’s source, looked for the numbers, and found them to be entirely different.

What Senator Whitehouse didn’t tell you was that he was “refuting” Furth’s accurate report of the historical record with projected numbers, which is to say pie-in-the-sky promises by politicians about what they’re going to do in the year 2016. It was, as I said last week, as if I’d announced plans to lose 30 pounds and then promptly gained 10. When Furth accurately reports my recent weight gain, Whitehouse calls him a liar because a 10 pound gain is not a 30 pound loss.

Paul Krugman, who must know better, cheered on this mendacity when he wrote:

a Heritage Foundation economist has been accused of presenting false, deliberately misleading data and analysis to the Senate Budget Committee.

What’s so shocking? Not the false, misleading data and analysis — that’s SOP at Heritage. … What’s shocking is that they got called on it, in real time.

Now it turns out that Senator Whitehouse’s numbers were even farther off base. Not only was were the numbers invented to begin with; he took those numbers for various years and added them up, even though they were already cumulative. It’s as if I’d announced plans to lose 30 pounds in 2013 and another 20 in 2014 — a total of 50 over two years. What Senator Whitehouse did was the equivalent of adding the initial 30 to the total of 50, and then announcing that my projected weight loss is 80 pounds. And then calling Furth a 90-pound liar for accurately reporting my 10 pound weight gain.

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Lies and Lying Liars

Published
by
Steve Landsburg
on June 7, 2013
in Current Events, Outrage, Paul Krugman, Politics and Truthseeking
. 35 Comments

When a politician misleads the public with distorted or flat-out fictional data, or uses eight minutes of national TV time to smear the character of the careful scholar who dared to report an inconvenient set of facts, you can always count on Paul Krugman of the New York Times to leap to the defense of truth and honesty — or, alternatively, to jump on the bandwagon if the politician happens to be a Democrat.

Here, you see, is what happened this week: Salim Furth, an economist at the Heritage Foundation (and a graduate of the University of Rochester, where I knew him to be a thoughtful and honest researcher) testified before the Senate budget committee, where he presented data from the Organisation for Economic Cooperation and Development (OECD) showing that most European governments have recently increased their spending. (This isn’t surprising for several reasons, one of which is that governments often spend more in recessionary times.)

Enter Senator Sheldon Whitehouse of Rhode Island, who spent eight excruciating televised minutes lambasting Furth and questioning his honesty, by reading out OECD numbers that differed dramatically from what Furth had reported. Some choice comments:

Dr. Furth, I am very concerned about your testimony….

When I look at the graph, for instance, which you source to the OECD — did you actually look at what the OECD says?….

They’ve actually written what the numbers are. And here’s what the numbers actually are, according to the OECD….

I am concerned that your testimony to this committee has been meretricious…I am contesting whether you have given us fair and accurate information.

And then there’s another eight minutes of reading out numbers that are, Senator Whitehouse keeps reminding us actually from the OECD, as opposed to these other numbers reported by Furth, which Furth claims are from the OECD, but obviously can’t be, because Whitehouse has the actual OECD numbers right here, and look how different they are — all of this interspersed with a barrage of attacks on Furth’s character and integrity. (See the video below, if you have the stomach for it.)

Now here’s the thing: There are a couple of legitimate reasons why Furth’s and Whitehouse’s numbers don’t agree. The first is that they’re for different time periods. Furth’s are for the years 2007-2012, while Senator Whitehouse’s are for the years 2009-2016. That’s right, 2016. Which brings us to the other reason these numbers differ: Furth’s come from the historical record, while Senator Whitehouse’s come from somebody’s ass.

Continue reading ‘Lies and Lying Liars’

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Keep Them Coming

Published
by
Steve Landsburg
on June 6, 2013
in Blogging
. 0 Comments

The extremely interesting boxcar discussion is now up to 233 comments, many of them extremely insightful. This morning, comments were briefly closed, but this was a glitch and it’s now fixed. (Thanks to Ken B. for alerting me.) Keep those comments coming!

Comments are turned off on this post because I want to keep the discussion all in one place. I’ll soon be back with more content, not all of it boxcar-related.

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